The empowered committee on stressed power assets, which met here for the first time on Friday, deliberated on possible changes in fuel allocation policies, regulatory frameworks and solutions to the vexed issue of irregular payments from discoms.
The empowered committee on stressed power assets, which met here for the first time on Friday, deliberated on possible changes in fuel allocation policies, regulatory frameworks and solutions to the vexed issue of irregular payments from discoms. It also discussed a payment security mechanism for independent power companies, which has been a long-standing demand of private power firms, sources said.
The panel, however, could not make significant headway as no representative from the Reserve Bank of India (RBI) turned up. On the agenda was a proposal to set up an asset reconstruction company (ARC) to take over banks’ stressed power assets. Implementation of the Pariwartan scheme — the ARC plan formulated by the Rural Electrification Corporation — requires amendments to the relevant RBI regulations.
The Allahabad High Court, while refusing a special waiver to the power sector from the RBI’s February 12 circular on Monday, had directed the committee to come up with a report by September end.
The HC also asked the power ministry to invite a senior RBI official to be a part of the committee.
As reported by FE earlier, the government is also unlikely to direct the RBI, using its powers under the Section 7 of the RBI Act for the first time, to give special relief to power sector from the central bank’s February 12 circular. The RBI directive was that if a resolution plan was not found by August 27, insolvency proceedings must be invoked against defaulting companies.
According to the power ministry’s assessment, a large chunk of the 34 coal-based projects — with a combined capacity of about 39 gigawatts and banks’ exposure of Rs 1.75 lakh crore — would be taking the insolvency route. Analysts estimate resolution under this process could result in hefty haircuts of up to 70% for banks.
According to the finance ministry, less than a dozen companies could get impacted by the circular, half of which could revived and the rest might be dragged to insolvency court.
Representatives from the ministries of power, coal, finance and railways along with the heads of lenders of the State Bank of India, Punjab National Bank, ICICI Bank, Power Finance Corporation and Rural Electrification Corporation are also a part of the committee. Friday’s meeting, which lasted for more than 90 minutes, was held at Cabinet secretary PK Sinha’s office.